TDMA Opinion>
From the September 27, 1999, issue of Wireless Week
Price Sits High Above Competition
By Monica Alleven
NEW YORK--In Bob Price's Rockefeller Plaza office on the 32nd floor overlooking the Manhattan skyline, a framed New York
Times Magazine article hangs on his wall. The article, from 1966, shows deputy mayor Price, on the telephone, sitting behind
then-New York Mayor John Lindsay. Much to the mayor's amusement, the article identifies Price as the "top man at City Hall."
Today, Price, president of Price Communications Corp., still has a phone to one ear and a keen sense of politics. But the staunch
Republican is no longer the man behind the man at the helm. His stores are selling more phones than ever, even though his
company raised prices. A relatively small company, Price Communications Wireless recorded a whopping 56 percent cash flow
margin in the second quarter, and local minutes of use were on the rise. Price Communications is profitable, and Wall Street likes
it.
Price, 67, is on top of the world, high above a city in which he takes great pride. But this isn't your typical multimillionaire. He lives
in the same New York apartment he and his ex-wife shared for some 40 years. He drives a 3-year-old Buick, even though he
could surely afford, say, a shiny new Mercedes or BMW. Hanging from his rearview mirror is a trinket, a faded toy his daughter
got while on a family vacation in Florida more than 30 years ago. Not exactly the Donald Trump of wireless.
Sure, he's got some eccentricities, if having a TV in the office and a QuoTrek device for real-time market data are considered
oddities. (Most people, particularly in wireless, would say that's a normal way of life.) He's as open to conversation as the guy
next door, sharing information about his family, past careers and aspirations for Price Communications. More often than not, he
will personally answer calls to the company. How many company presidents do that?
Meddling Or Paying Attention?
What engages many colleagues, industry insiders and analysts is Price's straightforward style-- brash to some, endearingly honest
to others. For example, he once told analysts during a conference call that his company's TDMA network engineering was good,
but not great. "We still have too many engineers," he says. Later, he explains, "we have a lot of busy signals. I would be foolish to
say things don't go wrong."
The candor is refreshing in a highly competitive industry rife with CEOs and presidents who refuse to share some of the seemingly
most basic information about their businesses. There's little guessing how Price feels about any given issue. "He will always tell
you how it is," says Jeffrey Hines, analyst at Deutsche Bank.
Not everyone is smitten by Price. The former investment banker admits some people, including his own son, consider him a
micro-manager, "tinkering" with things he should leave alone. Clearly, some rift exists between Price and his son, Steven, whom he
publicly blames in part for having sold PriCellular to American Cellular in 1997 at too low a price. The younger Price declines to
talk about that particular subject, saying only words of praise for his father. Today, Steven is pursuing a career in a wireless billing
and customer care business.
Surely some folks outside Price's immediate family would like to see him mind his own business. The feisty businessman has taken
on Global Crossing, using legal wrangling to oppose its acquisition of Frontier Corp., and Bell Atlantic Corp., using the courts, once
again, to oppose its acquisition of the Frontier cellular properties on grounds the companies' record-keeping was shoddy. With
Price and his lawyers involved, the companies are forced to negotiate a settlement or go the distance in court.
But some who work closely with Price on a daily basis say he's not a meddler at all. "I don't have that opinion or
I wouldn't be here,"
says Atlanta-based Price Communications Wireless President Dennis Stone, who has worked with Price since 1989 and is one of
several managers from PriCellular who remained at Price Communications.
Stone concedes Price, who receives nearly 40 faxes every day from stores so he can review their activities, is "very involved" in
the business, but store managers are given substantial authority in their markets. Stone himself tries to spend two or three days a
week visiting stores in the field so he can see what's going on "where the action is."
Analysts say a key to Price Communications' success has been its ability to control nearly every aspect of product distribution.
Price Communications, which uses the Cellular One name on its products, sells phones primarily through its own retail stores
rather than agents or giant consumer electronic chain stores. Part of the strategy is to teach customers how to use their phones,
thereby increasing the likelihood they will use more features and minutes.
Metrics Look Good
Price's hands-on strategy must be working. The TDMA cellular company is coming off an exceptional second quarter, and the
third quarter is likely to exceed analysts' expectations once again. The cash flow margin last quarter jumped to 56 percent, nearly
a record in the cellular industry. Few longtime wireless analysts recall when a cellular carrier last performed with such high
margins; most mature cellular companies are in the 40 percent to 45 percent range.
That's not all. Price Communications blew away analysts' projections for earnings per share, which were only 2 cents but enough
to put Price in the miniscule category of profitable wireless companies. The subscriber base rose by 19,088 users. Average
revenue per unit was $48.88, meaning the average subscriber logged about 235 local minutes of talk time. Operating cash flow
was $33.5 million, an increase of nearly 20 percent.
"He seems to be redefining what wireless can do," observes Cynthia Motz, vice president of equity research at Credit Suisse First
Boston. Like many other analysts, she doesn't see any signs that would lead her to believe Price Communications can't continue
on its positive path.
What's all this mean for investors? Well, someone who bought $1,000 worth of stock at the beginning of 1998 would have earned
at least $12,130 by now. Price Communications stock moved up 372 percent last year vs. the 134 percent rise in Deutsche Bank's
cellular index, which tracks several cellular carriers. Earlier this month, Price Communications set a new 52-week high of $22 per
share. Price himself owns enough shares to net more than $120 million.
Sure, one might argue that posting strong results is a cinch when there's little or no PCS competition. Analysts say the potential for
more competition in Price Communications' markets is always there, but the sparsely populated nature of the markets protects the
company to some degree. Plus, the company has survived in the face of stiff competition from Alltel Corp., BellSouth Mobility and
other independent operators.
Many rural operators have benefited from increased roaming revenue from big city carriers that offer one-rate plans. Price
Communications has almost two years left on its roaming contract with AT&T Wireless, and "they know damn well that next time
around, if they want to reduce what they pay us, it won't be a 50 percent reduction," says Price, seldom one to mince words.
Potential For Takeout
Analysts say one reason for Price Communications' stock increase stems from continuing speculation the company is a takeover
candidate. Its rural markets in Georgia, Alabama, Florida and South Carolina abut or are close to those of Bell Atlantic Corp./GTE
Corp., Vodaphone AirTouch plc, U.S. Cellular and AWS. But if those companies want Price's markets, they will have to up their
dollar figure. Bob Price won't sell unless the price--pardon the pun--is right. "If we do something in the next 18 months, I want to
see Price Communications get the benefit of it," he says.
Meanwhile, Price intends to once again fill the offices at his Rockefeller location that were left vacant from the PriCellular sale.
New and possibly existing staff will move in as Price Communications grows and pursues more acquisitions. The company
recently bid for Triton Cellular markets that abut its properties in the Southeast. The bid was higher than Price would have liked,
but synergies exist between the two companies that could lead to significant cost savings down the line.
Price may be a long way from his Bronx roots, not that far from his current offices, but he's staying in touch with his people--and
Wall Street is listening.
|
